EUR/USD Climbs on Strong PMI Data – Can It Sustain Above $1.04970?

The EUR/USD pair continued its upward trajectory, reaching an intra-day high of $1.0515 during the European session, driven by robust economic data from the Eurozone.

The latest Hamburg Commercial Bank (HCOB) report indicated the Composite Purchasing Managers Index (PMI) climbed to 50.2 in January from 49.6 in November, signaling a return to growth. Economists had anticipated a slight decline to 49.7, making the unexpected uptick a source of optimism for the region’s economy.

The services sector showed resilience with strong labor demand, although manufacturing remains under pressure from layoffs and dwindling orders. While the PMI boost strengthens the Euro’s short-term prospects, the European Central Bank’s (ECB) anticipated rate cut of 25 basis points to 2.75% could limit the currency’s long-term upside.

US Dollar Weakens Amid Fed Policy Uncertainty

On the U.S. front, the Dollar Index (DXY) dropped 0.6%, hitting a five-week low of 107.45. Former President Donald Trump’s remarks at the World Economic Forum (WEF) in Davos suggested a potential trade deal with China without imposing steep tariffs, which eased market concerns and pressured the Greenback. Trump’s endorsement of immediate interest rate cuts further weighed on the Dollar, as traders priced in expectations for looser monetary policy.

Looking ahead, the Federal Reserve’s policy announcement on Wednesday is expected to keep rates unchanged at 4.25%-4.50%. However, investors will closely monitor Chair Jerome Powell’s comments for hints on potential alignment with Trump’s stance on economic stimulus.

EUR/USD Technical Analysis: Key Levels to Watch

EUR/USD is currently trading at $1.04517, up 0.35%, maintaining its bullish stance above the pivot level of $1.04324. Immediate resistance is seen at $1.04971, with further targets at $1.05329 and $1.05682. A break above these levels could reinforce the bullish outlook and drive prices higher.

Key support is established at $1.03721, followed by $1.03415 and $1.03012. The 50-day EMA at $1.03986 offers crucial dynamic support, suggesting that the pair may hold its upward momentum if it remains above this threshold. A bullish breakout above $1.04971 could validate further gains, while failure to hold above $1.04324 may trigger selling pressure.

Key Takeaways:

• EUR/USD rises on strong Eurozone PMI data, with resistance at $1.04971.

• Weaker US dollar driven by trade optimism and Fed rate cut expectations.

• Traders eye Powell’s comments for future monetary policy direction.

The pair remains poised for further movement as upcoming U.S. economic data, including S&P Global PMI, could shape sentiment in the coming days.